Working Paper: NBER ID: w24096
Authors: Xavier Gabaix
Abstract: Inattention is a central, unifying theme for much of behavioral economics. It permeates such disparate fields as microeconomics, macroeconomics, finance, public economics, and industrial organization. It enables us to think in a rather consistent way about behavioral biases, speculate about their origins, and trace out their implications for market outcomes.\nThis survey first discusses the most basic models of attention, using a fairly unified framework. Then, it discusses the methods used to measure attention, which present a number of challenges on which a great deal of progress has been achieved, although much more work needs to be done. It then examines the various theories of attention, both behavioral and more Bayesian. It finally discusses some applications. For instance, inattention offers a way to write a behavioral version of basic microeconomics, as in consumer theory and Arrow-Debreu. A last section is devoted to open questions in the attention literature.\nThis chapter is a pedagogical guide to the literature on attention. Derivations are self-contained.
Keywords: Behavioral Economics; Inattention; Consumer Behavior; Market Outcomes
JEL Codes: D03; D11; D51; E03; G02; H2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| true price (p) (D41) | perceived price (ps) (P22) |
| default price (pd) (D41) | perceived price (ps) (P22) |
| attention parameter (m) (C20) | perceived price (ps) (P22) |
| true tax (t) (H29) | perceived tax (s) (H22) |
| attention parameter (m) (C20) | perceived tax (s) (H22) |
| actual price (p) + perceived tax (s) (H29) | perceived price (q) (D41) |
| attention parameter (m) (C20) | perceived utility (u1) (D11) |
| future utility (u1) (L97) | present-biased perception of future utilities (u0s) (D15) |